AI Q1 Earnings Call: Partner Ecosystem Expansion and Diversification Offset Guidance Caution

Artificial intelligence (AI) software company C3.ai (NYSE:AI) missed Wall Street’s revenue expectations in Q1 CY2025, but sales rose 25.6% year on year to $108.7 million. Its non-GAAP loss of $0.60 per share was significantly below analysts’ consensus estimates.

Is now the time to buy AI? Find out in our full research report (it’s free).

StockStory’s Take

C3.ai’s first quarter results were shaped by rapid expansion of its partner ecosystem, diversification beyond oil and gas, and increased sales of demonstration licenses. Management attributed revenue growth to deepened alliances with Microsoft Azure, AWS, and Baker Hughes, while highlighting 48% year-over-year growth in non-oil and gas verticals. CEO Tom Siebel noted the company’s focus on providing turnkey enterprise AI applications, emphasizing the value delivered through predictive maintenance, supply chain optimization, and other production-grade solutions. He stated, “Our approach has been unique and is highly differentiated from everyone in the market. We are an enterprise AI application pure play.” The company also pointed to a growing number of customer deployments across manufacturing, government, and life sciences as key contributors to its performance.

Looking forward, C3.ai’s outlook is grounded in broadening its partner-driven sales motion and accelerating adoption of its generative and agentic AI products. Management identified a robust pipeline in federal, state, and local government and highlighted the expanded Baker Hughes partnership as a foundation for sustained energy sector growth. CFO Hitesh Lath explained that investments in sales and R&D would moderate gross and operating margins in the near term, but anticipated that “revenue growth rate will continue to exceed our expense growth rate, so profitability remains simply a matter of scale.” Management also warned that geopolitical and budgetary risks could introduce volatility, stating that its guidance range was widened to account for “real market risk that’s out there.”

Key Insights from Management’s Remarks

Management credited the quarter’s growth to stronger industry diversification, a larger partner network, and initial traction in generative and agentic AI deployments. Renewed alliances and expanded government contracts were noted as particularly impactful.

• Partner-driven sales acceleration: Over 70% of new agreements in the past year involved partners, with collaborations such as Microsoft Azure and AWS materially increasing C3.ai’s distribution. Q1 saw a 419% increase in partner-supported bookings, indicating growing leverage from these alliances.
• Diversification beyond oil and gas: Non-oil and gas revenue rose 48% year-on-year, with significant gains across manufacturing, state and local government, and life sciences. Notable customer wins included US Steel, Rolls Royce, and multiple state agencies.
• Baker Hughes renewal fuels stability: The renewed and expanded Baker Hughes partnership—now extended through 2028—remains a cornerstone for C3.ai’s energy vertical and secures an established pipeline for joint solutions in oil, gas, and chemicals.
• Government sector momentum: C3.ai’s contract ceiling increase with the US Air Force Rapid Sustainment Office and expanded deployments in defense logistics and intelligence highlight growing federal traction. The Panda predictive maintenance platform, adopted for military aircraft, was cited as a key driver.
• Generative and agentic AI application growth: The company closed 66 new generative AI deployments across 16 industries in the past year, and agentic AI solutions grew into a $60 million annualized run-rate business, demonstrating tangible customer adoption beyond proof-of-concept.

Drivers of Future Performance

C3.ai expects future growth to be driven by continued expansion of its partner ecosystem, new AI product launches, and deeper penetration in government and commercial sectors.

• Partner engagement scale-up: Management aims to activate thousands of cloud provider sales representatives to jointly target hundreds of enterprise accounts, focusing on enabling more effective demos and accelerating sales cycles through simplified contracting processes.
• Federal and regulated market expansion: The company anticipates further growth in the government sector, citing expanded contracts with the US Air Force, Department of Defense, and new alliances with system integrators. Management expects these relationships to drive increased demand for AI solutions in mission-critical applications.
• Investment in innovation and margin impact: Continued investment in R&D, sales capacity, and partner enablement is expected to weigh on near-term margins. However, management believes the scale of opportunity in generative and agentic AI will support long-term operating leverage and eventual profitability.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will monitor (1) progress in scaling the partner-led sales model, especially activation of major cloud provider sales forces; (2) the pace of new enterprise and government AI deployments across diversified industries; and (3) margin trends as the company balances near-term investments with its stated goal of reaching profitability. Expansion in Europe and development of OEM licensing arrangements will also be key signposts for execution.

C3.ai currently trades at a forward price-to-sales ratio of 6.7×. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free).

High Quality Stocks for All Market Conditions

The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.

While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.